Hess files to spin off gas station business

Published: Saturday, January 18, 2014 at 2:00 p.m.

Last Modified: Friday, January 17, 2014 at 7:07 p.m.

Hess is returning to its retail roots, a trip that will include changes for a 50-year-old North Carolina oil company.

The largest operator of convenience stores along the East Coast has formed Hess Retail to own and operate the 1,200-plus gasoline station and convenience store network stretching from Maine to Florida, including WilcoHess operations in the Carolinas.

The creation was detailed earlier this month in a late December filing with the U.S. Securities and Exchange that said Hess Retail will be spun off to Hess Corp. shareholders this year if a third party does not make an attractive offer for the company.

The spin-off of Hess' gasoline stations and convenience store network is in response to a campaign by activist investor Elliott Management and the details come almost a year after Hess disclosed plans to become an exploration and production company by exiting the energy trading and marketing businesses.

Hess has already divested terminal business, including its terminal in Wilmington, raising about $7.8 billion of after-tax proceeds from these sales.

The filing also reported that Hess agreed to pay A.T. Williams Oil Co. $290 million for its 56 percent interest in WilcoHess, adding that the resulting 100 percent WilcoHess stake would become part of Hess Retail when the purchase closes.

A tentative agreement to acquire the Williams stake was announced in June.

Williams officials have declined to comment on the transaction.

"The spinoff has several advantages," said Fadel Gheit, an equity analyst with Oppenheimer & Co. "Obviously, there are tax advantages. Also, it will keep the brand name, which is worth a lot, because the brand name is well known on the East Coast of the U.S."

Gheit told Reuters he believes that a spinoff, rather than a sale, would be preferable for shareholders because there is possibility for strong growth at a stand-alone retail company.

Hess Retail "believes it is well positioned to benefit from positive long-term trends in the large, growing and fragmented convenience store market," the filing stated.

"Convenience stores have been and continue to be structurally protected from retail trends towards reduced in-store traffic due to changing consumer behaviors towards more online purchases," it said, explaining "fuel purchases require a physical presence at the convenience store which translates into in-store traffic and merchandise sales.

"Additionally, trends towards more convenient purchases are positive for the convenience store market, as approximately 85 percent of convenience store purchases are consumed within the hour."

<p>Hess is returning to its retail roots, a trip that will include changes for a 50-year-old North Carolina oil company.</p><p>The largest operator of convenience stores along the East Coast has formed Hess Retail to own and operate the 1,200-plus gasoline station and convenience store network stretching from Maine to Florida, including WilcoHess operations in the Carolinas. </p><p>The creation was detailed earlier this month in a late December filing with the U.S. Securities and Exchange that said Hess Retail will be spun off to Hess Corp. shareholders this year if a third party does not make an attractive offer for the company.</p><p>The spin-off of Hess' gasoline stations and convenience store network is in response to a campaign by activist investor Elliott Management and the details come almost a year after Hess disclosed plans to become an exploration and production company by exiting the energy trading and marketing businesses.</p><p>Hess has already divested terminal business, including its terminal in Wilmington, raising about $7.8 billion of after-tax proceeds from these sales. </p><p>The filing also reported that Hess agreed to pay A.T. Williams Oil Co. $290 million for its 56 percent interest in WilcoHess, adding that the resulting 100 percent WilcoHess stake would become part of Hess Retail when the purchase closes.</p><p>A tentative agreement to acquire the Williams stake was announced in June.</p><p>Williams officials have declined to comment on the transaction.</p><p>"The spinoff has several advantages," said Fadel Gheit, an equity analyst with Oppenheimer & Co. "Obviously, there are tax advantages. Also, it will keep the brand name, which is worth a lot, because the brand name is well known on the East Coast of the U.S."</p><p>Gheit told Reuters he believes that a spinoff, rather than a sale, would be preferable for shareholders because there is possibility for strong growth at a stand-alone retail company.</p><p>Hess Retail "believes it is well positioned to benefit from positive long-term trends in the large, growing and fragmented convenience store market," the filing stated.</p><p>"Convenience stores have been and continue to be structurally protected from retail trends towards reduced in-store traffic due to changing consumer behaviors towards more online purchases," it said, explaining "fuel purchases require a physical presence at the convenience store which translates into in-store traffic and merchandise sales.</p><p>"Additionally, trends towards more convenient purchases are positive for the convenience store market, as approximately 85 percent of convenience store purchases are consumed within the hour."</p><p><i></p><p>Metro desk: 343-2384</p><p>On <a href="http://www.starnewsonline.com/section/news41"><b>Twitter</b></a>: @StarNewsOnline</i></p>